‘Outrageous Interference’: Puerto Rico Bankruptcy Overseers Rage at Trump

When President Donald Trump in September removed all but one member of Puerto Rico’s Financial Oversight and Management Board (FOMB), it gutted the body amid a yearslong court fight over the $9 billion debt restructuring of the island’s increasingly privatized power authority.

Advocates and former officials say Trump’s purge is an attempt to dominate in the high-stakes battle over Puerto Rico’s electricity costs.

All the while, residents are struggling to keep their lights on as they grapple with an unreliable electrical grid.

“What we’re seeing here is an outrageous interference from the president of the United States into a process that was meant to be nonpolitical and for the benefit of the people of Puerto Rico, not for the benefit of the bondholders,” former FOMB member Antonio Medina Comas, a Trump appointee, told NOTUS.

The board, created by Congress in 2016 after Puerto Rico filed for bankruptcy with $70 billion in public debt, is a seven-member body overseeing the island’s debt restructuring.

A White House official told the Associated Press that the board members’ staffs’ “exorbitant salaries,” financial mismanagement and inefficiency were factors in the Trump administration’s August dismissal of five Democratic board members. About two weeks later, Trump dismissed Republican board member Andrew Biggs without an explanation.

In September, Biggs joined two fired Democrats, Arthur J. Gonzalez and Betty A. Rosa, in suing Trump, alleging their firings were illegal. The lawsuit also names Sergio Gor, director of the White House personnel office; John E. Nixon, the FOMB’s remaining Republican board member; and Robert F. Mujica, the board’s executive director.

In an opinion essay published in The New York Times last month, Biggs wrote that the FOMB has “undeniably” steered Puerto Rico away from “economic catastrophe.”

“If the six dismissals stand, this may soon cease to be true,” Biggs wrote. “If the board were to lose its independence, and lobby on behalf of the island’s creditors instead of its inhabitants, Puerto Rico could find itself right back in the financial morass that forced Congress to intervene nearly a decade ago. The consequences for Puerto Ricans are almost too depressing to contemplate.”

Biggs did not respond to multiple requests for comment.

The White House also did not respond to NOTUS’ request for comment about the timeline and selection process for board replacements.

In April, 1.5 million Puerto Rico residents lost power after a protection system failure and transmission line problem, just after they recovered power from a New Year’s Eve blackout that left 90% of LUMA Energy’s 1.4 million customers in the dark.

The Puerto Rico Electric Power Authority (PREPA) remains more than $8 billion in bond debt to some of Wall Street’s top investors. When PREPA filed for bankruptcy in 2017, bondholders sued to recover the full value of their investment. The case has dragged on for eight years, and Trump’s actions will likely postpone proceedings longer.

At the time of the FOMB board purge, the Puerto Rico financial board had a proposal with BlackRock and other investors to pay back $2.6 billion instead of the full amount owed.

Under that plan, average Puerto Rican residential electricity rates were projected to rise by about $9 per month, while commercial rates would increase about $35 per month.

After the news of the Trump firings broke, BlackRock ditched the deal, according to the Associated Press. It instead joined the PREPA Ad Hoc Group, a coalition of key bondholders that now holds nearly 90% of PREPA’s outstanding bonds, which is working to maximize its members’ payout in the restructuring process. The Ad Hoc Group did not respond to NOTUS’ request for comment.

Sergio Marxuach, policy director and general counsel for the nonpartisan Puerto Rico-based think tank Center for a New Economy, told NOTUS that since Trump fired six of seven board members, the key issue now is how the shakeup will affect the bankruptcy negotiations.

“The real risk here is that they reach some agreement that’s more beneficial to bondholders than what currently is on the table, and that eventually translates into higher rates,” Marxuach said.

The Puerto Rico financial board continues to employ a full staff under its one remaining board member and can legally continue to operate, Marxuach told NOTUS.

But a quorum of at least four board members is required for the board to make significant decisions, such as approving budgets or fiscal plans and challenging laws enacted by territory.

“When it comes to making major decisions, they are really in a tough spot right now,” Marxchau told NOTUS. “The law specifically says that certain decisions need to be approved by at least four board members, and you obviously don’t have that quorum right now.”

The future of Puerto Rico’s financial board is unclear.

According to federal law, board replacements must be selected by the president from a list of appointees from the majority and minority offices of each branch of Congress.

House Minority Leader Hakeem Jeffries’ office told NOTUS the White House has not reached out to request any such list.

House Majority Leader Steve Scalise, Senate Majority Leader John Thune, and Senate Minority Leader Chuck Schumer did not respond to multiple requests for comment.

The Puerto Rico financial board is not the only independent board or agency to face Trump’s wrath. The Environmental Protection Agency, National Labor Relations Board, Federal Trade Commission, and Federal Election Commission have faced significant funding cuts or leadership vacuums.

After PREPA declared bankruptcy, Puerto Rico entered a 15-year contract with private electric company LUMA Energy in June 2021. Since the transition, blackouts across the island have continued, and residents have responded in protest.

Puerto Rico Resident Commissioner Pablo José Hernández, a nonvoting member of the U.S. House of Representatives, introduced legislation in September that would conduct a study into LUMA’s energy grids and the necessary repairs. Hernández did not respond to multiple requests for comment.

President and general counsel for LatinoJustice PRLDEF, Lourdes Rosado said in a statement that the firings were “a blatant power-play to assume full control over the Board so it can favor vulture fund corporate bondholders who bought the archipelago’s debt cheap and now seek to be paid back at full price off the backs of Puerto Ricans.”

Trump has not shown much interest in Puerto Rico during his second term.

While he’s visited nearby Florida at least 14 times since the beginning of his second term, he has not yet visited Puerto Rico and has announced no plans to do so.

During Trump’s last presidential trip to the island following Hurricane Maria in 2017, he left residents with the lasting image of him throwing paper towels into a sea of hurricane survivors. The Category 4 hurricane left residents without water and energy for months, and rescue coordination failures left thousands of shipping containers of essential supplies undeliverable at the island’s ports.

President Donald Trump tosses paper towels into a crowd on Oct. 3, 2017, at Calvary Chapel in Guaynabo, Puerto Rico, after Hurricane Maria devastated the region. Evan Vucci/AP

Of the more than 3,000 deaths attributed to Hurricane Maria, only dozens were a result of the storm, according to a George Washington University report. The remaining were caused by a prolonged lack of access to clean water, food, and power.

“I’d like to just point out we’ve done more for Puerto Rico than anybody,” Trump said in September 2020. “Unfortunately, Puerto Rico is in — in the way of a lot of different storms, a lot of hurricanes. And the island is now stocked with nearly eight times as much drinking water and 13 times as much food as it had before I took office. So they’re ready to go if something should happen.”